Econ test 2

Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equal

$1250.

Refer to Figure 6-25. The equilibrium price in the market before the tax is imposed is

$6.

Refer to Figure 6-26. The effective price received by sellers after the tax is imposed is

$8.

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good. (ii) a necessity. (iii) an inferior good. (iv) a luxury.

(i), (ii), and (iv) only

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

0.55

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

0.67.

For the general population, a 10 percent increase in the price of cigarettes leads to a

4 percent reduction in the quantity demanded of cigarettes

Refer to Table 5-6. Using the midpoint method, demand is unit elastic when quantity demanded changes from

400 to 300.

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

60%.

Refer to Table 4-4. Suppose the market consists of Barb and Carl only. If the price falls by $2, the quantity demanded in the market increases by

8 units.

Rent control

All of the above are correct.

When a tax is placed on the sellers of a product, the

All of the above are correct.

Which of the following characteristics is required for a perfectly competitive market?

Both a and b are correct.

Refer to Table 4-9. Which combination would produce a decrease in equilibrium price and an indeterminate change in equilibrium quantity?

C

Which of the following demonstrates the law of demand?

Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

Which of the following is not an example of a market?

In the United States, a sick person cannot legally purchase a kidney.

How did the farm population in the United States change between 1950 and today?

It dropped from 10 million to fewer than 3 million people.

What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls, and more firms decide to manufacture traditional film?

Price will fall, and the effect on quantity is ambiguous.

Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs, and music lovers experience an increase in income?

Quantity will rise, and the effect on price is ambiguous.

Which of the following is not correct?

The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom.

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

The effective price received by sellers is $0.40 per bottle less than it was before the tax.

What would happen to the equilibrium price and quantity of lattés if the cost to produce steamed milk, which is used to make lattés, increased, and scientists discovered that lattés cause heart attacks?

The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous

What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold?

The price change will be ambiguous.

Refer to Figure 5-12. Which of the following price changes would result in no change in sellers' total revenue? TR=PxQ

The price decreases from $24 to $18

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

The quantity of the good demanded decreases by 0.2 percent.

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts

a decrease in the price of wool shirts and a decrease in the price of raw cotton

The demand for a good becomes more inelastic

as the market is defined more broadly.

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

be positive, and your roommate's would be negative

In a market economy, supply and demand determine

both the quantity of each good produced and the price at which it is sold.

Under rent control, bribery is a mechanism to

bring the total price of an apartment (including the bribe) closer to the equilibrium price.

A legal maximum on the price at which a good can be sold is called a price

celling

Refer to Figure 4-10. The movement from Point A to Point B represents a(n)

decrease in the quantity supplied.

Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a

decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range.

The price paid by buyers in a market will decrease if the government

decreases a binding price floor in that market.

Demand is said to have unit elasticity if the price elasticity of demand is

equal to 1

Which of the following is not an example of a public policy?

equilibrium laws

Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.

greater in the milk market than in the beef market.

Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

increase.

suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

inelastic and equal to 0.67.

Refer to Figure 5-4. The section of the demand curve from B to C represents the

inelastic section of the demand curve.

If a decrease in income increases the demand for a good, then the good is a(n)

inferior good.

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

less than $0.50

Demand is inelastic if the price elasticity of demand is

less than 1.

Refer to Table 6-2. A price floor set at $5 will

not be binding.

The highest form of competition is called

perfect competition

The demand curve for a good is a line that relates

price and quantity demanded.

A legal minimum on the price at which a good can be sold is called a

price floor.

In a market economy, who or what determines who produces each good and how much is produced

prices

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

reduce the number of acres on which they plant corn.

The price elasticity of supply measures how responsive

sellers are to a change in price

An example of a perfectly competitive market would be the market for

soybeans.

The forces that make market economies work are

supply and demand

In a market economy,

supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

In any economic system, scarce resources have to be allocated among competing uses. Market economies harness the forces of

supply and demand to allocate scarce resources.

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20

Refer to Figure 4-21. At a price of $16, there is a

surplus of 3 units.

When it comes to people's tastes, economists generally believe that

tastes are based on historical and psychological forces that are beyond the realm of economics

The value of the price elasticity of demand for a good will be relatively large when

the good is a luxury rather than a necessity.